Electronic dreams

The Exchange is a simple messaging service that makes it easier to work in the London market. It allows brokers, underwriters and system providers to have a single connection point from which they can send and receive electronic information between multiple parties using one common standard. Last year, the Exchange pilot demonstrated and proved the concept of the Exchange. The next challenge is to realise the full benefits of electronic messaging - but to do this, greater volumes of live messages must be sent and the process needs to be embedded as business as usual for practitioners.

Staying competitive

To facilitate this, a London market initiative, run by the London Market Group (LMG), called the Endorsement Pilot was successfully launched on 1 June 2010. The pilot focuses on a subset of marine (direct hull, cargo, war and liability) whereby all endorsements for this class of business are to be submitted and agreed electronically using ACORD messaging. 38 managing agents, 10 IUA members and 19 major brokers are currently participating. Other lines of business will be piloted as interest grows.

Endorsements are changes to policies which can result in enhanced or restricted cover. It is hoped that, in time, 100% of endorsements will be placed by electronic messaging, using industry agreed ACORD XML standards, freeing up brokers’ and underwriters’ time to focus on negotiations and transacting more complex business.

“The top three brokers [Aon, Marsh and Willis] agreed to give their support, but only with 100% commitment from managing agents,” explains Sharmi Bakrania, Project Lead for the Exchange. “Because it’s a subscription market the only way for brokers to avoid having to do dual processes was to get 100% managing agents committed and connected.”

It is a two-way electronic process, with the broker submitting the endorsement and underwriter responding electronically. Face to face negotiation can still take part at any point in the process, either before the initial endorsement message is sent or during the process. What is important is that the ultimate agreement is via electronic message and not by “ink on paper”.

A series of endorsement workshops have been run to get users up-to-speed with the electronic messaging and address any questions or concerns they may have around the electronic process.

“Normally once you’ve got the lead underwriter, you have to go from one underwriter to another if you want to get the following markets agreed,” explains Bakrania. “You literally have to walk that piece of paper around. In the electronic world the broker has the opportunity to send out the message to all following agreement parties simultaneously if he chooses.” 

Keeping it simple

“What we’re providing with the Exchange is really simple - all we do is transfer a message from A to B whilst checking it fulfils the standard,” says Bakrania. “Organisations can then choose how they wish to connect and how sophisticated they are in terms of integrating messaging with their internal systems and processes.”

“At the moment a lot of managing agents and brokers are using simple tools which don’t link up to their back office system, initially this will cause some pain, for example they will have to do some rekeying,” she continues. “However, longer term, the full benefit will be realised as organisations begin to integrate and move towards the ultimate goal of straight through processing.”

“Once we’ve covered endorsements we’ll look at the placement process in its entirety,” she adds. “We need to keep the momentum going but not do everything all at once and too quickly.”

Business benefits

While it is difficult to put exact figures on how much time can be saved by automating the more straightforward business processes, Beazley has made a rough estimate of the potential efficiency gains.

“We currently handle approximately 30,000 endorsements a year,” says Ian Fantozzi, underwriting and claims operations manager at Beazley. “If an underwriter can save just three minutes on each of these by dealing with them online, this alone frees up nine months of manpower.”
 
He believes the key to success is a collective approach from market participants. “We’re seeing encouraging signs with the level of participation in the e-endorsement initiative. This will ensure efficiency improvements across the market with simple processes being automated, freeing up brokers’ and underwriters’ time to focus on their specialist business.
 
“I see it more as a triage process,” says Fantozzi. “Certainly on the endorsement side, having an initial review of every endorsement that comes in and we can very quickly decide which ones can be dealt with electronically and which ones would require face to face consultation.
 
“I can see that being a subtle change to the business model for a lot of carriers in the market,” he continues. “It would lead then to the opportunity to reduce response times for simple contract changes and reduce the amount of waiting time for the broker as well.”